Cement Shortage Alleviated But Building Costs Still High

By Claudio Mendonca A cement shortage has stabilized in Florida, builders say, but building material costs remain high.

New and expanded cement plants are helping to fill a void in supplies that crippled the construction industry earlier this year, industry officials said. In the meantime, rising energy costs, four hurricanes and stronger demand from foreign markets are keeping construction costs from reverting to lower levels.

China’s voracious demands for building materials are being met at almost any price because of the 2008 Summer Olympics and a need for new facilities. China’s steel consumption grew by 50 million tons to 247.3 million last year – an increase of 25.4% from 2002.

"China today is a big player. They are building for the Olympics and demanding more goods," said Toni Pancelli-Hinckley, executive vice president of the Builders Association of South Florida.

With cement imports accounting for 45% of Florida’s building supplies, Ms. Hinckley said, product is being purchased by the Chinese at a higher price.

Also causing an impact on building costs are steel prices, which experts say have risen 200% since December. Prices have been rising $30 a ton per month.

China’s steel demand is skyrocketing as well.

"China is going up to steel mills and paying as much as $100 per pound when they need it," said Arturo Hevia, president of Design Management Builders Corp. in Miami.

As it turns out, the increase in prices is affecting aluminum, galvanized steel and metal partition. Prices for rebar, a scrap metal used for building construction, have grown to 30 cents a pound from 28 cents a year ago. Builders can use up to 100 tons in a large office building.

A weak US dollar also is hurting Florida builders – imported cement and steel is becoming costlier because of it.

With homebuilding booming in South Florida since the early 1990s, construction has become an important part of the region’s economy.

Miami-Dade County accounts for 60% of construction in Florida. Construction in Florida generates 500,000 jobs a year – third in the US behind California and Texas.

"Demand is strong, and we are in the middle of a building boom," said Ms. Hinckley.

Tarmac America Inc., one of three major concrete makers in Florida, has spent $220 million recently to upgrade its Medley plant. The company doubled its capacity and elevated its output from 900,000 to 1.8 million tons a year.

Still, demand is so high that construction companies are importing materials from South America and Europe.

"Our new plant changes production from a wet process to a dry process, becoming more energy-efficient and environmentally friendly," said Tarmac President Hardy Johnson.

The new facility is helping stabilize daily production in Florida at 5,000 tons, he said.

Some predict building costs will continue to rise.

Because of environmental opposition to production of some materials, Mr. Johnson said, there will be a shortage next year on aggregates such as limestone. "No one wants a quarry in their neighborhood," Mr. Johnson said.